7 Common Payroll Challenges your Business Should Know


7 Common Payroll Challenges

We get it - managing payroll is not simple. In hopes of making your payroll process simple and more effective, we compiled a list of common payroll challenges.

  1. Under or Overpayments

    Payroll mistakes made during manual payroll processing don’t only impact the employee’s pay, but also any deductions and benefits that they might have. These mistakes can affect taxes, accruals, pensions, garnishments, and more.

    In order to avoid employee distress, payroll errors should be fixed as soon as possible by a payroll expert. The consequences of missed deadlines and filing errors can be time-consuming and result in penalties and fees.

  2. Misclassification

    The classification of an employee or worker can be difficult, as the process includes various types of classifications: part-time and full-time staff members, temporary staff, as well as seasonal and independent contractors. Within the changing landscape, it is important to also take into consideration remote working and changes.

    Tax authorities tend to take employee misclassifications seriously -- if an employee is misclassified, it can affect their entitlement to EI benefits and affect how the worker is treated under other legislation, such as the Canada Pension Plan and the Income Tax Act. Making sure employees are classified correctly will help both the employer and employee in the long term.

  3. Observing deadlines and important dates

    One of the primary duties of the payroll department is meeting various important dates and deadlines. Be sure to mark your calendar(s) and enable reminders for important dates for tax remittances, tax filing, and other payment obligations to avoid penalties. If an employee has a temporary work visa, ensure that you mark your calendar with the expiry date too.

  4. Record Keeping
    Data management and keeping employee information up-to-date is not only important for contacting the employee, but for government reporting, such as T4’s and ROE. Invalid or duplicate Social Insurance Numbers (SIN) are common mistakes, so make sure to verify Social Insurance Numbers when you set up a new employee. When running payroll some payroll systems will alert you or display a warning message if a SIN is invalid, temporary, or duplicate (already in use by another employee).

  5. Confidentiality and Privacy
    In this era of technology, privacy and data protection concerns are higher than ever. It is imperative that payroll records are maintained and handled in confidentiality, all while being stored in a secure environment. Be sure not to disclose any personal employee information without securing the employee’s permission beforehand, unless the disclosure is for the purpose of complying with a court order or government mandate.

    Personal Information Protection and Electronic Documents Act (PIPEDA) applies to federally regulated employers. British Columbia, Alberta, and Quebec have enacted privacy legislation for provincially regulated, private sector employers.

    In the case of an absence of privacy legislation, employers are encouraged to follow best practices to minimize the risk of privacy breaches by putting in place a detailed privacy policy. This privacy policy should outline and define privacy exceptions (e.g. an employer’s right to monitor websites visited by employees or use of company email) and ensure that the policy is applied consistently. The principles outlined in PIPEDA may provide a guide for drafting privacy policies.

  6. Keeping Up-to-Date with employment law and legislation
    Keeping up-to-date with employment laws, as well as legislative and regulatory changes can be a challenge for payroll professionals. If your company does not meet the standards of various acts and legislation, there may be serious repercussions.

    Understanding employment and tax law are necessary in order to accurately report your company’s operations. Incorrect filing or employee misclassifications can lead to fines, penalties, or even lawsuits. Ensuring that your compliance with the correct laws and regulations is essential for helping your business operate in a sound matter.

  7. Inadequate Backup
    Whether you admit it or not, technology has done a superb job in automating many tasks. However, as you are aware, technology can fail. For this reason, it is essential for your company to have a reliable and accessible backup of your payroll data.

    Backups should be part of your disaster recovery plan. Alternatively, a type of backup is a payroll person. Having a payroll backup in the event that your regular payroll person is unavailable, is crucial to ensuring that your staff are paid and remittances are made.

Need some tips for your payroll year-end?
Check out our blog: 6 Tips to a Successful Payroll Year End

Having crossed trained payroll people who understand payroll ensures that Payroll is always taken care of in a timely matter. For more information about payroll, take a look at our Payroll Services. We may have the payroll solution and services that you and your organization have been searching for!

Learn More about Payroll Software:
What You Need to Know About Sage Payroll

Anna McNally

About The Author

Anna McNally

Anna is an experienced Payroll Certified Practitioner and is a volunteer with the Canadian Payroll Association as a Subject Matter Expert.  She is a certified Sage 300 ERP consultant with fifteen years’ industry experience. She has implemented over 100 ERP systems. Before consulting and project management, Anna held accounting positions across various industries and brought this experience to her understanding of customer requirements. Anna is certified in Sage 300 ERP and Sage HRMS and an expert in Long-Term Care Home customizations.